From Ownit to Litton to Specialized to Select Portfolio Servicing, from Bad to Worse

[Mort_B_Bad]

My lovely spouse and I reside along with our three children in Murrieta, CA. We are currently staring down the financial uncertainty of foreclosure that so many others have faced. Fortunately, we are still on the "current" side of the coin, but will be looking at a loan reset in May, which will likely be an increase of approx $900.00. We will be seeking a loan mod on our primary loan from Select Portfolio Servicing (SPS) and possibly from Litton on our second. We do not intend to walk away, for mere business decision, even though, from this side of the fence, it looks like it might be financially reasonable to do so with a home that is upside down $150 +/- and declining fast.

I am glad to have found this forum and greatly appreciate any help or advice from this ever growing community. I will pay this forward.

We relocated to SoCal from North Carolina in Dec '05 because my spouse accepted a promotion, which included a relo package. The promotion was a “take it cause there might not be another”, so we packed up and left our 15year/5.25% mortgage, signed a contingency agreement (at full price because no one would take a contingency then) and rented back until our home in NC sold (for which we were low-balled by about $25k). We considered renting in order to get to know the area (wish we had now) but risked losing the payment of all closing costs under the relo package if we did not purchase within the 9 month window.

The particulars are as follows:

• Purchased home for $470k in Dec '05, closed in April '06.
• Secured 100% financing (80% primary, 20% second) from Ownit Mortgage Solutions (now belly up as of Dec '07).
• Primary loan $352k at 7.25% (ARM)
• Second loan $117k at 10.25% (fixed with balloon at year 23)
• Mortgage broker (a friend) was not exactly forthcoming with all the terms.
• Payments are $2052 and $1052 respectively.
• Notes are in my spouse's name only (mortgage broker though it best because I was gainfully unemployed at the time).

The ugly truth:

• Loans were sold roughly three times.
• Primary loan is now with Select Portfolio Servicing aka Fairbanks Capital.
• It is an interest only, ARM that converts to fixed in year 5.
• It has a 24 month prepay with a 20% penalty.
• It also is set to reset in 24 months (which will be in May). I think these little gems get me the most, they guaranteed themselves a rate adjustment.
• 3% cap on first adjustment, 1% thereafter until it gets to 13.25%.
• 6 month index (LIBOR), so it will go up every 6 months from here on in.
• Did I miss anything? Oh, there's the amended default language, that says I am in default if my payment is not received by the due date.

Other ugliness:

• Comps in our immediate area from homes that are identical to ours are in the $310k range.
• We have a beautiful view of unfinished condos in our backyard that have been dilapidated for three years now (exposed studs, broken windows). We would have a hard time selling even in a short sale.
• Did I mention $8500 in property taxes?

A few bright spots:

• We both are employed and have a combined income well over $100k/yr.
• Second loans only draw back is its 10.25% rate.
• As I stated before we are current.

Firstly, let me say that this is no one's fault but our own. It's still a blur and I'm not sure how this awful loan got past us. By removing me, from the loan and from the process in general, did not help. Heck, I wasn’t even at closing. I was in NC dealing with our previous home, closing, etc. One thing is for sure, we relied too heavily on someone to explain the things that one would normally expect to be explained by a broker. I mean, how does one express that they do not want a prepay ad still end up with one? I know, it’s a subject for a different thread. Again this is on us. Had I not experienced a post 9-11 job loss, we might not have needed to secure 100% financing.

So as it stands (still with me ;-) we need to know as much about SPS as possible. I know they are (or were) crooked and I suspect that they are only participating in “the alliance” (Hope Now Alliance) to gain brownie points with respect to their modified settlement. As I read in another post, they are just as crooked as before, but are doing it legally.

In terms of a loan mod, some of the factors that we would outline are:

• A shortfall in income, as a conversion of my employ from contract to permanent has meant $1,200/month less in net pay.
• Outrageous property taxes, for which we pay $8500/yr, separate from our mortgages (a reward for buying our home at the peak of the bubble). An adjustment is in order, should we be able to stay in our home.
• Spouse’s company did not meet sales goals resulting in lost income.

At this point, the only real step we have taken (aside from getting an education online) is we've had an attorney review our docs to make sure there was nothing else to be surprised about. Mo, I’ve read through your post on how to do a loan modification, and for that I thank you. I will need to read it again. Hopefully, there are those of you out there that have had experience with Select Portfolio Servicing (dare I say a positive one?) and are willing to share.

Welcome to the forum and thank you for joining....

The loan that you have was originated by a shop that sold to the slice and dice CDO's and as such you have been through the mill. You wound up at SPS and I am sorry. You need to go to the FTC www.ftc.gov web site and use a search of the Web Site and pull up Fairbanks Capital....that is the old company that used to be SPS, they Feds came in an intervened in 2003 and 2004 due to the servicing irregularities. It was a criminal case that did not go there due to the number of people impacted the Feds felt it would be almost impossible to prosecute. SPS is frankly not much better.....they give lip service, they do adhere to servicing "rules", but are as helpful as a guy in hell handing out cupfuls of steaming hot coffee. I have other comparisons, just not able to publish them.

This was a group originally set up to service sub-prime loans....and they are tough and entrenched in their methodology. The fellow that ran them is a real piece of work when they were Fairbanks Capital. You are going to have to be very focused and very assertive when dealing with them....they are up in Salt Lake City and the whole batch of them is just plain dead set to keep the status quo.

So...you need to QWR the loan that should put some fear in them given their less than stellar history....you need to get a number to the Loss Mit/Home Retention department immediately and start the process. I do not have any get around numbers for them as of yet, just the numbers that you have. This is not a group that has a real dedication to meeting the spirit of the Hope Program, Alliance or any other program...you are correct it is lip service.

So do the QWR, stay on them daily, I do mean daily and any time that they make a commitment to you or an agreement fax that agreement as you understand it to them for confirmation. Make sure with this group that you name, property address, loan number and last 4 of SS#are on every page that you fax and fax it 3 times, that way it gets to the file.

QWR -You need to be the proactive, responsible party with them and keep at them. It would not hurt to send a QWR demand - there are examples of the letter in the Tool Box. In that letter demand your Life of Loan History, copy of Note, Deed of Trust, Riders, all Assignments of the Deed of Trust, TIL, Right of Rescission (if refi), Lender Final HUD-1, copy of initial loan application and final lender loan application, all disclosures and all loan documents in your file, copy of appraisal. Send this three times certified return receipt required and also send it to the Broker, Title Company and all others in the Chain of the Transaction.

This thread has a really good example:

My Countrywide escapade and Hi!

Reading your story tells me you are underwater about $160K. Frankly, given you are lucky to be in California, and the nature of your debt appears to be "non-recourse," under California Code of Civil Procedure Section 580b, I'd be at least threatening as an approach to a workout, staying in the home as long as possible and not make payments. Yes, your credit will be damaged as the result of the reported foreclosure, but it seems to me consideration should be given, particularly in light of the fact that the 2nd loan is entirely underwater and any chances of completing a short sale are complicated by the fact that you have two lenders.

Continuing down your path is, in my humble opinion, simply throwing good money after bad.

Take care,

Daniel

[Moe Bedard]

Welcome fellow Inland Empire local !

Thanks for joining the forum and sharing your story. The facts are that everyone has the free right to choose in this country and you choose to stick it out and keep your home.

Did you hear Ben Bernake on TV the other day. He was basically telling lenders that they will have to start reducing principles on borrowers loans in order to keep them in their home. The reason I bring this up is because I feel the people that stick it out and try and work with their lender, will eventually receives some kind of incentive like this. Meaning sooner or later, our government is going to mandate or step in and make sure that we do not have 203 million people walk from their homes.

I am sorry Professor, but I feel this is 100% viable and highly likely in the future. It may be 6-12 months away. But I believe it is the only way.

With that said. I encourage you to stick it out and fight to fix your loan and save your home.

I would draw up the QWR immediately and as for a chain of assignments from servicer to servicer and also a life of loan history. I would make a complaint based on the fact that you are not sure that your mortgage was transfered correctly and that you want to have every penny documented that you ever paid to all these servicers because since they have transferred this loan soooooooooooooooooooooooo much, they may have mad mistakes and you will never ever know unless they answer your QWR with all the supporting documentation to substantiate what is owed and what has been paid on the property.

[Mort_B_Bad]

Thank you for the advice! Well, it took me a week or so to pick up the phone and call them. I was expecting the worst...you know..."your not behind so you so not qualify". Instead to my dismay...I got right through to the loan resolution dept and spoke to a nice fella named James. So, I went into my story and suggested that we do a loan mod and the reasons why, etc. And now here's the shocker. He says, "Your interest rate is not due to adjust until June of 2011". WHAT? Are you sure? So he told me he was going to check with his manager and he put me on hold for a few long minutes.

When he returned, he told me that I had just qualified for the rate freeze and that it is a result of the Bush Plan. At this point all my ammo dropped to the floor.

So, I am left with time and the right to pay for another three years until the loan converts from interest only. The house will still be underwater in three years, likely to be so for another 5 - 8 years. At least I can now see what the government will "put on the table" (inside joke for all Californians).

So, at this point, I still want to QWR them, but do not want to stir the pot and give them reason to change their minds. I also will still need to do a loan mod, but maybe now I can wait a little to see if they (SPS) get a little more uncomfortable with the wave of defaults and foreclosures that are getting ready to hit.

As a side note, the article on the (NAME REMOVED) website (that I found through your blog) was very informative in regards to the mortgage crisis, how it all works and mostly, where its headed. It's a scary time! (URL REMOVED) . One of the things that I learned is, the month that my loan is originally supposed to adjust (May 08), will be the highest date of loan resets to date. If one figures in that the default to auction process (for the lender) lags 15 months from the reset date, then its possible that it will be ugly all the way until fall of '09.

So what do you think I should do? Again, I will only be in the same boat in three years and I will have spent roughly $112,000 for that right. I do not believe there will be a refi option with a home that is still under water. I am going to post my thoughts on the tax implications of walking away and renting vs. staying in a new thread. On the surface, renting appears to be cheaper per month until one figures how much more tax that deductible interest results in.

And finally, I have had problems at times accessing this site, as it has been down numerous times in the last few days. Popularity causing bandwidth probs? Hosting company issues? Hopefully, it gets worked out because this is a great resource.

OK....here is a plan...you have a rate freeze on an I/O product...figure the amortization of the loan out from here on to maturation and make a separate payment each month, for that amount or another amount that would be comfortable that will go to principle....there is no law against this....

You do have to write 2 checks and designate the one check for the payment to interest and the other as a "PRINCIPLE REDUCTION". Other wise the morons will not know how to apply it....

Sorry about the Web Site, I have been up and down, but only for seconds, there is some tweaking going on in the system....go figure, bigger and better.....

I would start on the principle reduction, cause I do see some relief in sight down the road for your other issues, what they are exactly....any one's guess, but they have no choice but to do something...and oh by the way that 2008 adjustment is not the worst, go check the 2009 adjustments starting on the Option ARMS......that is really ugly.....that is probably when we really see some options opening up for the borrower...real options as the funds/pools/Securitizations and some of the Wall Street Boyz are starting to really fail....I mean FAIL....there is going to be some real change coming from the next 3 months of those failures.....

[Mort_B_Bad]

Can you say...Bear Stearns

Thank you for the idea. Something to consider seeing as how much interest I will have to pay over the next several years on a 4 bedroom submarine!

Let you and this forum in on a Secret....my little close to the vest secret...I told Bear NOT to buy those loss leaders in 2004 and 2005....I told Citi in 2005 and 2006....also told a few others....in no uncertain terms....do not buy this ______...you can fill in the blank. It will not preform and gave the various reasons....

Their response at one time in the Bear hallowed trader halls....."there is a shelf for every loan". Yeah, well my next statement to them was "there hasn't been a shelf built yet that will hold these up".

Amazing...it fell down..........................ooooppppppsssss. I hate to be right, but in this case....I TOLD YOU SO.........MORONS.

Try the interest trick....Micro Soft Money has an amortization engine in it, plug the Principle balance in and the remaining term and rate, and let her rip....it will give you an amortized payment for the remaining term...you can choose it or any other amount that you are comfortable with...oh another trick...keep it in round figures like 200.00 or 250.00 they are to ignorant to apply anything other than round figures to the principle as principle reduction...and I am a lender....